Reno Employment Index Remains Near Record High

Without further ado, here are all the latest metrics from Northern Nevada. Stat Pack copublisher and RCG Economics Principal John Restrepo is available to answer questions at jrestrepo@rcg1.com.

In December the RCG Employment Index’s 12-month moving average (“12MMA”) for Reno-Sparks remained at 99.2 for the 3rd month in a row. At just 0.6 points away from the record high, the pace at which the Index had been increasing has slowed considerably. The Index is up 0.9 points since December 2016. The Index peaked 11 years ago in December 2005 at 99.8. The trough of 89.6 occurred in January 2010.

Reno-Sparks job growth on a 12MMA fell even further in the final month of 2017, dropping another 0.2 points from 2.8% to 2.6%. The rate of growth is 2.2 points lower than that recorded in December 2016. The lowest rate of growth in the last 10 years occurred in December 2009 (-9.3%). In August 2016 the region’s job growth rate reached a record high of 4.9%, surpassing its previous high mark of 3.7% achieved in December 2006, but in December of 2016 the rate began to drop and has not stopped since.

The 12MMA of the headline unemployment saw a 0.1 point improvement, reaching 4.1% in December. This was a welcome drop after 3 straight months over which the rate remained the same. The rate had been falling reliably every month by 0.1, sometimes 0.2 points, since September 2011, but the decline began to stall in August of this year. When compared to the December 2016 headline unemployment rate of 5%, this December’s rate was 0.9 percentage-points lower. For the sake of comparison, the headline unemployment rate in Las Vegas has not changed for the last 5 months, holding at 5.1% since August. Reno’s unemployment rate is very near rates seen before the Great Recession.

The U-3 unemployment rate for Nevada, after seeing its first uptick in Q3 since Q2, 2016, fell back down by the 0.2 points it had risen last quarter, returning to an even 5% in Q4. The U-3 rate is now just 0.4 points above the average rate for 2007, the year the Great Recession hit. The U-6 rate fell 0.6 points from 11.4% in Q3 to 10.8% in Q4, a healthy decline and the biggest in over a year. Nevada’s U-6 rate is still the third highest in the nation, beating only New Mexico and Alaska. As shown in the chart, the spread between the two rates is generally tightening, albeit gradually, indicating that wage increases will continue to solidify.

In terms of the U-3 rate, Nevada improved a spot in Q4 and now has the 8th highest headline rate in the nation, tied with Ohio. In Q2 it was beating 13 other states.

There were 85,358 construction jobs in Nevada recorded for December 2017. 15,300 of those were in the Reno-Sparks MSA (12MMA). This is 5.8% more than the 14,467 jobs reported the previous year in December 2016, and 63.6% of the peak (see below). Reno’s healthy economy has produced strong residential and commercial markets in the region, and this continues to benefit the construction sector.

The latest stats show that 6.7% of the region’s payroll job-base is in construction. Construction jobs in the Reno-Sparks MSA peaked at 24,042 in August 2006 on a 12MMA basis. At that time, the industry accounted for 11.1% of all jobs. However, construction jobs were artificially inflated due to the housing bubble. The sector continues to recover since bottoming out in February 2012 when there were only 8,792 construction jobs.

Over a 12-month period ending in December 2017, on an annualized basis, visitors to Washoe County reached 5.15 million. YOY growth in visitation to Washoe County is outpacing growth in Clark County, where visitor growth continues to decline. In December 2017 YOY growth was 5.2%. By comparison, the YOY growth rate in Las Vegas for the month of December was -1.7%. Early in 2016, Reno had been lagging behind Las Vegas in visitor growth, but the tables have turned with YOY visitor growth rates in Washoe County beating those of Clark County every month since June 2016.

Washoe County has now seen YOY growth in visitor volume every month for nearly 3 straight years, since January 2015, at an average rate of 2.8%. The 12MMA peak occurred in May 2004, when 467,904 visitors came to Washoe. The highest annual growth rate occurred in January 2013, when visitor volume grew 5.8%. Despite earlier challenges, the Reno-Sparks hospitality industry has made important gains.

Washoe County’s 12MMA YOY gross gaming revenue grew by 2.4% in December 2017. This brings total revenue up to $69.1 million, or 77% of the peak (see below). For comparison, Clark County had a YOY growth rate of 4% this December. The YOY growth rate for Washoe County has been positive for 3 years straight at an average rate of 2.9%.

Gaming revenues peaked more than 11 years ago in June 2006 at $89.4 million. On an annual growth rate basis, growth peaked at 5.5% in June 2006.

While Washoe County’s economy continues to benefit from rising taxable retail sales, the YOY growth rate has fallen considerably from a year ago. In November 2017, the rate of growth was 6.2% YOY, or 3.2 points lower than the year period ending in November 2016. However, when compared to the month prior, it is down 0.2 points. Taxable retail sales reached $686.8 million in November, having already surpassed, in March 2016, the previous peak on a nominal basis (not inflation-adjusted). As the chart shows, Washoe’s taxable sales growth is very near the state average at just 0.4 points below.

Success in business attraction and retention is driving the region’s economy and is the primary cause of growth in taxable retail sales, though increasing visitation has also contributed.

Note: It will be interesting to see how adult-use marijuana sales will pan out relative to the taxes they will generate. The first of month of reporting occurred this July, but there has been a delay in releasing the data to the public. While still small relative to Nevada’s revenue-base, we will begin tracking the contribution that these sales are making to the base as soon as the data are available, likely next month.

The Q4, 2017 median sales price of $349,360 for single-family home resales in the Reno-Sparks area represents a 13.6% jump YOY. Compared to the previous quarter, the price changed very little, growing by just 0.1%. The Q4 median price is now approximately $39,107 (12.6%) greater than the $310,253 that would have resulted from using the 1990-2001 average annual appreciation rate of 4% per year. Last quarter the difference was $41,736. The Reno-Sparks median price is increasing rapidly. Housing affordability is a looming problem that should be monitored closely by public officials and community leaders for its potential negative impact on economic growth and business attraction.

MLS home resales in Washoe County fell 3 units to 565 in December 2017 on a 12MMA basis. When compared to December 2016, this is an increase in resales of 4.1%. For more than 2½ straight years now home sales have been increasing on a YOY basis, though the rate of growth has been fluctuating between 4% and 7% over the previous 6 months, with the rate falling 1 point in December compared to November. Over the last 6 months the average YOY growth rate is 5.7%, compared to 3.3% for the preceding 6 months. The median sales price rose to $336,901 (12MMA) in December, a 10.9% increase from December 2016. By comparison, the Las Vegas median resale price in December increased by 11.4% to $225,900. The looming affordability issue also applies to the resale market.

According to Colliers International, Reno-Sparks Office vacancy maintained its downward trajectory in Q4, 2017. Office vacancy fell 0.4 points from the previous quarter to 12.3% on a 4QMA basis, its lowest value since Q1, 2007. The Reno-Sparks Spec Office market has been improving, albeit slowly.

The Q4, 2017 Industrial vacancy rate also fell, reaching 7.1% in Q4. This was a drop of 0.7 percentage-points from 7.8%. After 5 consecutive quarters of increasing vacancy, the Industrial markets vacancy rate has now fallen 6 straight quarters. Vacancy is now comfortably below the 10% stabilized rate. Although a large amount of new product has recently come to market, there appears to be healthy demand in the Reno-Sparks MSA for Industrial space.

The 12MMA of the average weekly wage (not adjusted for inflation) in the Reno-Sparks MSA is up $2 (0.28%) in December to $798. This is the 6th consecutive month that growth was positive after 11 months of negative growth. When considered on a YOY basis the unadjusted weekly wage is down -0.6% from $802 in December 2016.

The inflation-adjusted 12MMA wage of $684 is again up $1 from previous month’s real wage, putting it -2.6% lower than the $702 recorded in December 2016. This was the 2nd month in a row of real wage growth, interrupting a decline in the real wage that began in June 2016. In December Reno-Sparks’ average weekly real earnings were 2.4% higher than the Las Vegas average of $668.

In December the Reno-Sparks MSA’s average weekly hours fell 0.1 points from 35.9 to 35.8, erasing the small gain made the previous month. Despite this small decrease, the general trend since October 2014 has been upward. When compared to December of last year, weekly hours are up 0.5 hours from 35.3. The 8-year peak occurred in July 2009 at 36.8 hours, while the trough (8-year) of 32.5 hours occurred 3 years ago in September 2014.

The average price per gallon for regular unleaded gasoline in Reno-Sparks as of February 2, 2018 was $2.92, up $0.10 (3.6%) from $2.82 the previous month. When compared to the previous year the price of regular unleaded is up $0.23 (8.5%).

According to AAA, “Six of the most expensive gas prices in the country are in the West Coast region: Hawaii ($3.39), California ($3.34), Alaska ($3.05), Washington ($2.99), Oregon ($2.89) and Nevada ($2.75). On the week, California (+7 cents) saw the region’s largest increase, while Washington, Oregon and Nevada each saw a 4 cent increase, Alaska jumped 2 cents and Hawaii increased by a penny.

According to the EIA, gasoline stocks in the region dropped by the largest amount seen in the last 12 weeks – nearly 700,000 bbl. Inventories of gasoline sit at 33.9 million bbl, which is still 3.3 million bbl higher than last year’s level at the same time.”

Per the World Gold Council, in January, the end-of-month spot price of gold (ounce of pure gold) increased by just over $11 (0.92%) to just under $1,278 on a 12MMA basis. On a YOY basis, the price of gold is up 1.7%. It peaked in December 2012 at $1,678. Prices have been increasing on a YOY basis for the past 18 months. Though the YOY growth rate had been trending down, it has now increased for 2 straight months.

Excise tax revenues generated from marijuana sales through the first five months are $24.6 million. The most readily available data report by the Nevada Department of Taxation contains retail and wholesale excise taxes. These taxes do not include sales and use taxes paid at point of sales at the dispensaries or the annual licensing fees paid by the industry. The wholesale excise tax is collected at a 15% rate from growers to dispensaries on medicinal- and recreational-use marijuana, while the 10% retail excise tax is charged to dispensaries’ recreational users.

According to the Department, tax revenue from the sale of marijuana is expected to reach $120 million over 2 years. With tax revenue only expected to rise in the coming months, the state appears to be well on track to reach this goal. The major “know unknown” is if the U.S. Justice Department will go through with its threats of curtailing or putting a halt to the industry’s activities.